|Claimant(s):||NEW YORK CENTRAL LINES, LLC|
|Claimant short name:||NEW YORK CENTRAL LINES|
|Footnote (claimant name) :|
|Defendant(s):||THE STATE OF NEW YORK|
|Footnote (defendant name) :|
|Judge:||Alan C. Marin|
|Claimant's attorney:||Goldstein, Goldstein, Rikon & Gottlieb
By: Jonathan M. Houghton, Esq. and M. Robert Goldstein, Esq.
|Defendant's attorney:||Andrew M. Cuomo, Attorney General
By: J. Gardner Ryan, Esq., AAG
|Third-party defendant's attorney:|
|Signature date:||August 26, 2010|
|See also (multicaptioned case)|
This is the decision following the trial of the claim brought by New York Central Lines, LLC for the value of its property appropriated by the defendant State of New York as part of the State's widening and improving access to the Brooklyn-Queens Expressway (BQE). CSX Transportation, Inc. is the successor in interest to New York Central,(1) and this Decision and Order will generally refer to the claimant as CSX.
The appropriation involved the Fremont Secondary Line, a rail freight line some eight miles long that runs from the Oak Point Yard in the Bronx across the East River via the Hell's Gate Bridge to Fresh Pond Junction in Queens County.(2) About half of the Fremont Line had been previously sold to Amtrak, leaving CSX with 3.86 miles, all of it in Queens.(3)
Specifically, the property taken affected various parcels in Queens along a 0.9 mile stretch running from 31st Avenue near Borough Place southward to 37th Avenue and Broadway.(4) The parties have stipulated that the property interests of CSX appropriated by the State amounted to 236,836 square feet in fee and 43,856 square feet by permanent easement.(5) In addition to the permanent takings, there were temporary easements on five parcels, which have all ended, the last one on January 6, 2010 for Parcel 196. The State's appropriation was effective January 6, 2000,(6) except that the temporary easement for Parcel 196 had commenced on January 10, 2000.
I. The Permanent Takings: In Fee and By Easement
A. The Parties' Methodologies
Both sides regard the highest and best use of this property to be as a corridor, with claimant holding a more expansive view of the concept to include non-rail uses such as power transmission, pipelines and fiberoptics.
However, the parties have divergent views on the methodology for valuation. CSX contends that the proper method is based upon sales of comparable rail corridors, whose sale price reflects the added value from connecting points or places. Under this method, the rail corridor value is a product of: 1) the value of the land it is sitting on, or adjacent to, known as the across-the-fence value (ATF); and 2) its added value as a corridor - - the corridor factor. For the permanent easements, the claimed amount is the ATF times the corridor factor further multiplied by the percentage of rights taken, which in this case is either 50% or 90%, depending upon the particular parcel.
The State, for its part, uses a cost method, and values the land along with the cost of improvements it constructed, including the demolition of three bridges,(7) their replacement with a much longer span and the construction of new retaining walls. Defendant contends that it should receive a credit for the cost of the improvements against its valuation of the property rights taken and impaired.(8)
Claimant put on the stand Charles Rex, who has a speciality in the appraisal of rail corridors. Mr. Rex presented about a dozen comparable rail corridor sales and highlighted four of them as particularly useful in determining the corridor factor for the affected portion of the Fremont Line.(9) Also testifying on behalf of CSX was Carl Rowe, its principal engineer for public projects.
The State called four witnesses: civil engineer Bruce Savik and appraiser Kenneth Young on the bridge and other improvements; Douglas Golden generally on railroads and rail corridors; and James MacCrate, a real estate appraiser. Defendant, largely through Mr. MacCrate, asserted that comparable sales using a corridor factor is an inappropriate method: the sales pointed to by Mr. Rex are not comparable because of their location (in, among other places, Houston, south Florida and the Washington, D.C. metropolitan area); their length (the south Florida corridor is 81 miles from Palm Beach County to a point south of the Miami International Airport); and the use of in-kind valuations.(10)
However, Mr. MacCrate did not directly challenge the theory of corridor value as a product of the across-the-fence value and the corridor factor, but how and whether to apply it in the field, i.e. this case. Claimant countered that MacCrate did not care to apply it here, pointing to his having located 75 corridor sales (apparently not all railroads), but making only four or five follow-up calls for specifics.
This Court accepts the validity of the comparable sales method for valuing rail corridors; a validity which is not undermined by comparable sales drawn from around the country, comparable corridors as long as 81 miles; or the inclusion of in-kind compensation. For example, the across-the-fence component comprehends and accounts for an intensively developed, expensive place like New York City.
With that said, this Court cannot conclude that a corridor factor should be applied here. The record is insufficient to demonstrate that the permanent takings impaired CSX's ability to run its freight operations or run them under any well-founded view of future operations. When the BQE construction began, the line, which was comprised of only one set of tracks, had a second set of tracks added, which was paid for by the State and intended to be temporary. This set of tracks, estimated by Rex to be 1,600 to 1,900 feet long(11) or about one-third of a mile, was sufficient to ensure continuity of service.
Mr. Rex testified that a typical rail corridor is 60 to 200 feet wide; and according to defendant, the 3.86 mile CSX portion of the Fremont Line varies from 37 to 200 feet in width, with most of the corridor less than 100 feet wide.(12) As an article submitted by claimant states, "If a corridor is wide enough to perform its connecting function, its width and area are of little importance."(13) In the opinion of Douglas Golden, who advises railroads and owns and operates the Carolina Coastal Railway, "To maintain service on this line would require a minimal corridor width . . . A single track operation shouldn't require more than a 50-foot right-of-way, which would mean that potentially it's excess." Although Golden added that "based on drainage, based on other things, as to whether it's excess or not, I haven't studied that."
Train speeds on the Fremont Secondary Line, which is not a main line, are limited to 10 or 15 miles per hour.(14) In railroad parlance, the line is a dark territory; it is out of contact with the central dispatcher, and only one train at a time may traverse it. The second temporary track remains; only one track was used during the subject BQE construction project. There is no current intent, plan or prospective plan to make the Fremont Line, or CSX's portion of it, a two-track line, and CSX does not contend that the defendant's appropriation has prevented it from doing so. In that context, it might be noted that the Easement Restatement Agreement does reserve to CSX the right to construct a second track so long as it does not interfere with the BQE.(15)
As for moderate or even exceptional growth in freight traffic, actual or potential, insufficient probative evidence was put forth to show that the permanent takings affected CSX's ability to support any additional traffic.(16) We did hear that the Fremont Secondary line is the only land-based freight line into Long Island, and that its value would be enhanced by the Cross Harbor Tunnel, which is proposed, but with no time frame or planning stage set forth. According to Mr. Rex, the Tunnel "would cross from either New Jersey or Staten Island into Brooklyn that would provide one or two freight lines into Long Island that would supplement access of rail freight into Long Island, removing approximately a million semi-trailers a year off the Verrazano and George Washington Bridges."
Both the Canadian Pacific and the Providence & Worcester railroads run over the Fremont Line. As of 2000 according to Mr. Rex, CSX had five trains per week with 50 or 60 cars, running from the Oak Park Yards to the Fresh Pond Junction and back. Canadian Pacific uses the track three times a week for 10 cars in each direction, and Providence & Worcester three times a week with 40 cars each way.(17) In Rex's appraisal dated November 10, 2006, he concluded that since CSX took over the line in 1999,(18) freight traffic has doubled, although in 2001 the Fremont Line had become linked to the Bay Ridge rail yard and in 2005, a Clifton Park (Albany)-Fresh Pond train was added, running three times a week averaging about 30 cars. We have learned of no other connections to the Fremont Line.(19)
With respect to non-rail purposes, such use of the Fremont corridor is limited, if not effectively blocked for our purposes, by the Franchise Agreement of 1907. That Agreement authorized the railroad and related usages on this corridor to cross New York City streets. Non-rail uses are not so authorized, and there had been no such use as of the taking or at any time prior thereto. The Agreement provides that the railroad in the subject area is permitted:
To maintain and operate under or over the routes aforesaid, including all streets which shall be intersected by the new railroad, or over and under which any part of the routes thereof shall run, telegraph wires and wires, cables, conduits, ducts and ways for the distribution of power, heat and light, and other appurtenances for use of the new railroad, but for no other purpose.(20)
Such access can theoretically be negotiated, and Mr. Rex testified to his experience in that area: "I have been involved in both valuing and analyzing thousands of agreements - - occupancy agreements for railroads and for others - - and we know that those agreements are that when you come to a city street, they have to get other permissions to cross those streets, and they're usually not unreasonably withheld in any case."
Later on, Rex noted that "we have this pipeline which of course wasn't there to our knowledge when CSX owned the property." But that is the extent of the detail on that longitudinal item. No evidence was submitted to demonstrate any credible prospective non-rail usages, for example, whether any planning had begun to negotiate same and seek the necessary approvals.
The State assigns a dollar figure to the entire CSX portion of the Fremont Secondary Line (the 3.86 miles), but the change in what it calls "Total Useable Area" is the aforementioned fee taking of 236,836 square feet(21) apportioned by zoning classification - - at $40, $49 or $51.50 per
square foot, as the case may be. This results in what defendant calls an "Estimated Value Contributed to the Corridor" of $11,815,031.(22)
Where claimant would have multiplied this result (or its version thereof) by 2.5,(23) defendant multiplies it by 0.15, asserting that: "CSX can still operate a railroad along the corridor and have access for maintenance. These parcels had limited utility before and have similar after. In effect, the loss in value is nominal, or, say, 15% to CSX because they have retained these rights by the restatement agreement."(24)
Fifteen percent of $11,815,031 equals $1,772,255 as the value lost from the fee appropriation of CSX's Fremont Line property, but the defendant values the improvements paid for by the State, principally bridge replacement and new retaining walls, as amounting to $26,640,000. Thus, the State regards its appropriation as having increased the value of CSX's Fremont Line property by $24,868,000.(25)
The bridges crossed by CSX, as of the taking were old, but functional. There was no showing of any problem or variance from applicable standard or safety regulation, nor that CSX was planning to replace or reconstruct one or more of the bridges. As for new retaining walls, they were necessary only because of the BQE project. In any event, the Court of Appeals has held that improvements to remaining land cannot be used to offset the value of land taken in eminent domain. Chiesa v State of New York, 36 NY2d 21 (1974). See also Done Holding Company v State of New York, 144 AD2d 528 (2d Dept 1988), leave denied 73 NY2d 710 (1989).
B. The Court's Calculation of the Permanent Takings
At trial, the across-the-fence value served as a kind of way station to the ultimate valuation destination; but can it serve the more basic function? It has been defined in terms of intermediate value:
In the valuation of real estate corridors, the value [is] based on a comparison with adjacent land. Before the consideration of any adjustment factors, the ATF value accounts for location and market conditions. Accordingly, this [ATF] is an intermediate value without or prior to the consideration of the corridor factor.(26)
On this issue, Mr. MacCrate, in his appraisal dated October 10, 2008, stated: "It is inappropriate to apply the across the fence method to value lands for any other purpose other than as part of the corridor. The land within the corridor does not have an independent market value for other uses because the adjustments that have been made are limited by the application of this methodology."(27)
Yet, this Court has above concluded that multiplying by the corridor factor or subtracting the cost of improvements are each inadequate methods to fairly and accurately value the State's appropriation for its BQE project. To return to the standard framework, see Saratoga Harness Racing Inc. v Williams, 91 NY2d 639, 643 (1998), with the Court of Appeals discussing that appropriated property is traditionally valued by one of three methods: comparable sales, income capitalization or replacement cost less depreciation, with the last approach generally eschewed except for specialty properties (91 NY2d at 644). The income approach with the capitalization rate of 10% is relied on here for the temporary easements.
Using the across-the-fence valuation as the actual method, and not an intermediate stage, is still, after all, a comparable sales approach. It reflects the zoning class and sales price for those parcels across the fence. Mr. Rex explained that, " The across-the-fence value is determined locally. That is, you look for sales for that type of property, preferably adjacent to the railroad corridor. If they're not adjacent to the railroad corridor then at least comparable to those properties that are adjacent to the railroad corridor." Significantly, as Rex pointed out, "prices for corridors vary primarily based upon the across-the-fence value. In fact, my studies have shown that 90-plus percent of the variance of price from one corridor sale to another is as a result of the across-the-fence value."
Generally, comparable sales tend to be relatively easy to work with and that may be reflected in the fact that CSX and the State were able to agree on the ATF value for each zoning class: $40 a square foot for property that was zoned M1-1 (commercial) and for residential property: $49 for R-4 zoned property and $51.50 for R-5 property.(28) Ultimately, all R-4 zoning was considered by claimant's appraiser to be M1-1. No explicit argument was advanced via expert testimony at trial, case law or other precedent that using an agreed-upon ATF to value the fee taking of rail corridor property would be improper if it were determined that there was no disturbance of existing or future rail use.
The total fee taking was 236,836 square feet. The Court accepts Mr. Rex's consideration of all R-4 zoning to be M1-1, "because that zoning was split by the BQE, and M1-1 zoning was the primary zoning on the subject's side of the BQE."(29) Thus, the 236,836 square foot fee taking is comprised of 112,878 square feet at $40 per and 123,958 square feet at $51.50 for a total of $10,898,957.(30)
As part of the foregoing calculation, the Court valued at 100% the taking of six parcels condemned in fee that were subject to paragraph one of the Easement Restatement Agreement, which allowed CSX to operate its railroad so long as it did not interfere with the newly rebuilt BQE.(31) Claimant values its loss at 50% because CSX and the State have shared rights over the property with CSX unable to use it for secondary purposes such as a natural gas pipeline or fiberoptics. But given the above determination of no demonstrable progress toward surmounting the limitations of the Franchise Agreement, the Court has kept the six parcels within the 236,836 square foot 100% taking.(32)
Eight parcels are the subject of permanent easement. Four of them had retaining walls constructed as a result of the State's taking - - to support the embankment of the tracks that were moved and to protect the BQE (P130, P193, P194 and P195). Claimant in its post-trial memorandum stated (page 21): "What use can be done with property burdened by an immovable retaining wall?" Having, inter alia, viewed the photographs that are claimant's exhibit 8, the Court accepts Mr. Rex's conclusion of a 90% loss of value(33) -- but again without the corridor factor. Thus, adding the listed amounts for each of four parcels under the column headed, "Taking ATF Value" in the table opposite page 126 in claimant's exhibit 6 yields the sum of $1,205,049.(34)
For the other four properties denominated by claimant as P130-A, P193-F, P194-J, and P195-H, claimant values the loss due to the State's easement as 50% because the Easement Restatement Agreement allows rail use, but not the secondary utilizations.(35) Given the Court's determination on the Franchise Agreement limitations, the Court finds no lost value to CSX.(36)
II. The Temporary Easements
The temporary easements involve five parcels, P196 through P200. Each party uses the stipulated value per square foot of either $40 or $51.50 depending upon zoning classification and a 10% rate of return.(37)
Claimant would multiply the result by the aforementioned 2.5 corridor factor, which the Court rejects for the same reasons it did so with respect to the permanent takings. Thus the annual rents are as follows: Parcel 196 is $17,932; Parcel 197 is $937; Parcel 198 is $1,118; Parcel 199 is $6,937; and Parcel 200 is $540.
The temporary easement for Parcel 196 ran from January 10, 2000 to January 6, 2010; the foregone annual rents were $17,932 for 9.989 years, or a total of $179,123.
The temporary easements for parcels 197 and 198 ran from January 6, 2000 to May 17, 2006; the foregone annual rents were $2,055 for 6.359 years, or a total of $13,068.
In view of the foregoing, Claimant New York Central Lines, LLC is awarded the following amounts:
- $12,104,006 for the permanent takings in fee and by easement, plus the statutory rate of interest from the date of the taking, January 6, 2000;
- $179,123 for the temporary easement for the period from January 10, 2000 to January 6, 2010, plus the statutory rate of interest thereon;
- $13,068 for the temporary easements for the period from January 6, 2000 to May 17, 2006, plus the statutory rate of interest thereon; and
- $49,286 for the temporary easements for the period from January 6, 2000 to May 18, 2006, plus the statutory rate of interest thereon.
Claimant is thus awarded the total amount of $12,345,483 with interest to run as stated above.
The award to claimant herein is exclusive of the claims, if any, of persons other than the owners of the appropriated properties, their tenants, mortgagees or lienors having any right or interest in any stream, lake, drainage, irrigation ditch or channel, street, road, highway or public or private right-of-way, or bed thereof, within the limits of the appropriated properties, or contiguous thereto, and is exclusive also of claims, if any, for the value of or damage to easements or appurtenant facilities for the construction, operation or maintenance of publicly owned or public service electric, telephone, telegraph, pipe, water, sewer or railroad lines.
Any filing fee paid by claimant may be recovered pursuant to Court of Claims Act §11-a.2.
Claimant's pending motion no. M-77661 to strike defendant's amended appraisal is denied as moot.
LET JUDGMENT BE ENTERED ACCORDINGLY.
August 26, 2010
New York, New York
Alan C. Marin
Judge of the Court of Claims
1. See claimant's exhibit 3, which is the September 8, 2006 Easement Restatement Agreement between the State of New York and CSX Transportation,Inc.
2. Claimant's exhibits 1 and 2.
3. See the map on page 64 of defendant's exhibit A.
4. More precisely, the segment is 4,837 feet long (cl exh 5, vol 1, p 38). See claimant's exhibit 10 and pages 13 and 22 of claimant's exhibit 5, volume 1. See also defendant's exhibit J, the Endpoint Definition section.
5. Claimant's exhibit 4.
6. Maps for the fee acquisitions and the permanent takings were filed in the Office of the Clerk of Queens County on January 6, 2000 (cl exh 3, p 3). Said maps and the property descriptions set forth therein are adopted by the Court and incorporated herein by reference. The claim was filed with the Clerk of the Court on June 26, 2000 and it has not been assigned or submitted to any other court, tribunal or officer for audit or determination. The parties have waived viewing of the property pursuant to Section 510 of the Eminent Domain Procedure Law.
7. Kenneth Young, defendant's expert on the cost of improvements, testified with respect to three bridges that were demolished and replaced by one longer bridge. Page 85 of defendant's exhibit A-1 (from defendant's appraisal by James MacCrate) spoke of "six bridges that were replaced." Mr. Young indicated that the three bridges he was referencing were only for railroads and carried no vehicular traffic.
8. Defendant's exhibits K-1, page 35; K-2, page 36; and A-1, page 86. Mr. MacCrate also stated that were he able to obtain the pertinent data, the income method would be appropriate. But even so, the resort thereto was rejected, quite reasonably, by Mr. Rex, who explained the difficulty of extracting such figures from an integrated, national enterprise. See Rex's Appraisal Review and Rebuttal Report of October 10, 2008 (cl exh 9, pp 17-18). Mr. Rex did concede that the several states have developed taxation formulae to tax railroad corporations on their in-state presence.
9. Claimant's exhibit 5, volume 1, opposite page 119.
10. Id.; claimant's exhibit 11, pages 4 and 5 and page 6, note 4.
11. Defendant's expert Douglas Golden in his Report had the temporary track running " from just north of 41st Avenue to just south of Northern Boulevard, a distance of more than half a mile" (def exh J, fourth unnumbered page).
12. Defendant's exhibit A, page 25.
13. Charles F. Seymour, The Continuing Evolution of Corridor Appraising (cl exh 17, p. 15).
14. Douglas Golden's report in evidence provides that the maximum speed is 10 miles per hour (def exh I, last unnumbered page), but other testimony was elicited to the effect that the maximum is 15 mph.
15. Claimant's exhibit 3, ¶1.
16. See generally, for the national growth of rail freight, the bottom table on page 3 of Association of American Railroads, May 2009, Railroad Profitability (cl exh 16).
17. Claimant's exhibit 5, volume 1, page 28.
18. "In June 1999, the Fremont Secondary Line track segment of Conrail became part of CSX Transportation" (def exh J, first unnumbered page).
19. Id., pages 31and 32; defendant's exhibit J, third unnumbered page.
20. Defendant's exhibit B, Addendum IV: page 13 of the Franchise Agreement. The franchise was granted February 14, 1907 to what was then the New York Connecting Railroad Company (page 2 of the Agreement).
21. This is 2,635,862 square feet minus 2,399,026 square feet in the Before and After columns on page 86 of defendant's exhibit A-1.
22. Claimant's exhibit 4; defendant's exhibit A-1, page 84.
23. Claimant had deemed all the R-5 zoned property stipulated at $49 a square foot to be zoned M1-1 at $40 a square foot.
24. Defendant's exhibit A-1, page 85.
25. Id., pages 3 and 86. Defendant rounded $1,772,255 to $1,772,000 and subtracted the latter figure from $26,640,000.
26. Mr. MacCrate on cross-examination reading from the Dictionary of Real Estate Appraisal, 4th edition.
27. Defendant's exhibit A, page 15. See also pages 85 and 88 of defendant's exhibit A (and for that matter, the same pages in exhibit A-1) for a similar statement: "The estimated value per square foot is not a market value applicable to any specific parcel within the corridor. The land values should not be applied to any individual parcel of the corridor for an alternate use. It is the estimated value before and after of the land as part of the contiguous corridor based on the across the fence methodology."
28. Claimant's exhibit 4.
29. Claimant's exhibit 6, first page of the Summary of Important Conclusions.
30. Defendant's exhibit A-1. The calculation resulting in the figure of $10,898,957 is from the table at page 84, except that in the top row (the only row with R-4 zoning) the square footage of 101,786 is multiplied by $40, instead of $49, so that the figure in the rightmost column of the top row becomes $4,071,440, instead of $4,987,514.
31. Claimant's exhibit 3, page 3; the parcels are denominated P124-D, P125-E, P126-G, P-127-I, P205-B and P207-C.
32. Of course, claimant using a corridor factor of 2.5 would still value these six parcels at 1.25 times the across-the-fence value, or 125% thereof. The area of the six parcels described in the table on page 124 of claimant's exhibit 6 as "Fee Purchase by State (with easement to CSX)," totals 19,207 square feet.
33. While included in Rex's testimony was his observation of "sign boards" from the aerial photos, which could be a use for an otherwise effectively ruined parcel, such was not further developed.
34. The four individual values that sum to $1,205,049 are: $419,712; $325,202; $203,843; and $256,292.
35. Claimant's exhibit 6, page 124; claimant's exhibit 3.
36. The ATF value of these four parcels, totaling 11,973 square feet and subject to permanent easement the claimant describes as "with rail use," is $255,094 (cl exh 6, opp page 124).
37. Defendant's exhibit A-1, page 90 is the same as page 130 of claimant's exhibit 6, except that exhibit A-1: does not use the corridor factor; lists the rent foregone on an annual basis, not monthly as claimant does; and rounds each parcel's area to the square foot. The text in A-1 at page 90 describes the return rate as 8-10%, but its table uses 10%, as does claimant's exhibit 6 (page 130).
38. These decimals are derived as follows: the 0.989 of 9.989 for Parcel 196 is 361/365; the 0.359 of 6.359 for parcels 197 and 198 is 131/365; and the 0.362 of 6.362 for parcels 199 and 200 is 132/365.
39. The termination dates for parcels 197-200 are contained in the Stipulation that is claimant's exhibit 4. During the trial, on the record (January 21, 2010), the parties stipulated that the easement for Parcel 196 terminated January 6, 2010.